Just look at your average family of five. Twenty years ago, they would spend their evenings together, watching one scheduled broadcast chosen from a limited number of channels on the family TV. Today, new technologies mean that entertainment is available on numerous channels on a multitude of devices. So broadcasters might need five different types of content to cater for one family at any one time.
Each member might be watching something different. A football match, for example, or a drama series like Game of Thrones, a reality show such as Dragons’ Den, or a kid’s programme. Each one of these is tailored towards a different audience. And that’s just TV entertainment. Let’s not forget about the offerings provided by the games industry. Or the music industry. Or social media.
The point is that the media industry is in the grip of a technological revolution, and it’s affecting every part of the business. Distribution models, commissioning procedures, revenue streams… they are all evolving as the industry responds to the shift to digital and personalisation.
It’s resulted in a flood of new channels, platforms and experiences, all of which have to be fed, constantly, with compelling, quality content. For if they are not, then their audiences move on.
Like I said, it’s all about content. There’s a huge demand. And while this is good news for content providers, it does have its downsides, putting creators under enormous pressure to come up with the goods. Distributors don’t have it easy either. They need to be sure that their content supply is secure and that they are getting the most out of it.
Taken together, the pressures are having a big impact on the market.
The most obvious effect is an increase in media M&A activity as ambitious companies solve their content challenges by expanding. So production companies are acquiring content creators. Content providers are buying distributors. And we’re not just talking about one or two deals here: this vertical integration is happening in remarkable numbers.
Take the first quarter of 2016, for example. Figures show that between January and March this year there were nearly 130 deals in the global media sector, equating to around 40 deals a month. In my view, taking into account the comparatively limited number of players in the industry, that is a surprisingly large amount of consolidation. Something big is going on.
A closer examination of the transactions also reveals that media firms are not restricting vertical integration to domestic deals. They are increasingly looking overseas to find the most advantageous targets.
It’s something I’ve seen quite a lot of here, in Ireland, particularly in the animation sector. Only last year Dublin-based animation studio Brown Bag Films was acquired by US creator, producer and distributor, 9 Story Media Group. Both companies are focused on children’s entertainment, and the demand for content for kid’s TV shows is, of course, huge.
A more recent deal earlier this year involved the acquisition of Dublin-based animation company Boulder Media by US toymaker Hasbro. This deal will see Boulder continue to produce animated series on behalf of third-party clients, in addition to producing animation projects for Hasbro’s best-known brands.
It’s vertical integration in action and, in my view, heralds another trend caused by the ever-growing demand for content: a slow globalisation of the industry.
Globalisation of the industry
China is one of the primary players in this breaking down of geographical boundaries. The recent acquisition of US film studio Legendary Entertainment by Dalian Wanda Group is just one of the international Chinese deals completed this year. But similar acquisitions are happening all over the world.
Just look at the 2014 merger between VFX houses Double Negative and Prime Focus World. It brought together operations based, at the time, in London and Singapore, and London, LA, Beijing and India, respectively.
Deals like these are headline news. They indicate a shift towards a globalised media industry. But behind the headlines are a myriad of queries, discussions and near-completions that prove the trend too. It’s something that we, with our world-wide network of industry specialists, are well positioned to notice.
Reshaping industry structures
And we are. Globally speaking, my media partners are seeing these trends around the world.
As Hanno Hepke, partner and head of technology, media and communications at Warth and Klein Grant Thornton in Germany, puts it:
“The accelerating digitalisation of the media industry is entirely reshaping the industry structures: content owners and producers enter distribution; distributors create or acquire content companies; customer access companies, whether telco’s and network companies, e-commerce players or hardware players, use their access to the consumer to push content services; publishers increasingly recognise the importance of ‘moving images’; and advertising money has definitively taken the digital path. The winners in this race will bring the right content in the suitable format, on the appropriate device suiting the users’ current usage situation at the right price.”
It all comes down to content. Tailoring it. Delivering it. And above all, monetising it. Demand for content is shaping the media industry before our eyes. And with power like that, content is king indeed.
John Gleeson is a media partner at Grant Thornton Ireland and the global leader of media at Grant Thornton.